Gather Up All Of Your Collection Notices

In Chapter 7 bankruptcy it is important to include all of your creditors in the schedules. This guarantees that the underlying debt will be discharged from your financial record. Discharge wipes out that debt forever, it cannot be collected on or transferred to anyone else. There are no tax implications as the debt is discharged, not forgiven. Therefore, the creditor cannot write off the debt and send you a 1099C (which would require you to pay taxes).

When I file a Chapter 7 bankruptcy for a client I run a bankruptcy specific credit report. This credit report should catch most of your major debts. However, some things are not reported and some things slip through the cracks. A common example is medical bills. Medical bills rarely are disclosed on credit reports. When you file Chapter 7 bankruptcy you want to make sure that all of your medical debt is discharged. It is important to gather up all medical statements and provide them to your bankruptcy attorney. This may require you to call your medical providers to get any bills or statements. You should also track down any collection notices you may have received from third parties who are collecting on medical debt.

It is likewise important to find any collection notices for any credit cards. While the underlying debt should be discharged in any case, it still will make your life easier if all of the collection agencies are notified when you file bankruptcy.

If you have retained an attorney to follow Chapter 7 bankruptcy, make sure to keep any collection notices in the lead-up to filing. All utility bills are also worth gathering up as they sometimes do not show up on the credit report. If you owe individuals such as old landlords (or even individual people), you should include them as well even though they will probably not be on the credit report.

If you have any doubt whether or not to provide something to your attorney, error on the side of giving them everything. If you have any questions about what can be included in a chapter 7 bankruptcy, call us at 412-414-9366. I would be happy to discuss your situation and set up a free consultation!

All Income Counts Towards The Means Test In Bankruptcy

The bankruptcy means test is a six month look-back at all sources of income used to determine whether or not you can file Chapter 7 bankruptcy. I will normally ask potential clients to provide me with paystubs for this period of time. However, the income that is considered for the means test in bankruptcy goes beyond what is in a regular paystub.

For instance, if you receive cash from an employer, or from sales or your own business, without a paystub, it still counts. If you are a 1099 employee who doesn’t receive a paystub, that counts as well. Gig economy income for jobs such as Uber or Doordash, even if very limited and used to pay bills, must be disclosed. Any income from any employer (in any form) will count towards the means test.

Sometimes, late in the filing process, a client will disclose cash income or one of the situations above. The means test will need to be redone to account for this additional income. If you have any doubt, tell your bankruptcy attorney about the income. It will alleviate problems in the future.

Also, non-employment money can sometimes be counted towards the means test. This would include unemployment compensation, child support, and household contributions. While most people would not think of these sources as “income”, they are for purposes of the test..

VA benefits, it should be noted, do NOT count towards the means test.

If you’re considering filing bankruptcy, call us at 412-414-9366. I would be happy to set up a free consultation to see if filing bankruptcy is an option for you.

Helping Your Elderly Parents With Bankruptcy

Adult children calling to inquire about bankruptcy on behalf of their elderly parents is a common occurrence in my practice. Several issues are usually important in this situation. If you are considering inquiring about bankruptcy on behalf of your elderly parents, here are some things to keep in mind.

The first issue will be the mental competency of your parent. This can vary greatly from case to case. Some adult children reach out on behalf of parents who are completely competent. They may be reaching out as a courtesy or to get information for their parents. But, at the end of the day the parent is capable of answering the questions themselves. In other cases, the parent is not mentally competent to answer the questions. In these situations it will be important for the adult child to get a power of attorney over their parents affairs. This would allow them to testify on behalf of the parent in any bankruptcy proceeding. In some situations, the parent may have diminishing, but not complete loss of mental capacities. It will be important for the bankruptcy attorney to speak with a parent to get a feel for whether or not they can understand the situation.

Another scenario that will be important to keep in mind is when the parent owns a home. Bankruptcy law limits the amount of equity to be exempted in a home. If you are calling on behalf of your parent, you should know what their home is realistically worth on the market, and any liens against the home such as mortgages or taxes. This will help the bankruptcy the attorney determine whether or not they will be able to file.

A final, unfortunate, situation that I am starting to see more often of is elderly parents who have been scammed. The scams vary in degree and method, but they often lead to drained bank accounts and maxed out credit cards. In these situations it is best for the adult child to help the elderly parent file a police report. Unfortunately, this will not usually lead to an arrest. However, it may be useful in ensuring that you will get a bankruptcy discharge, or in some cases forgiveness of any deaths resulting from the scam. It is also important to take control of the parents finances in these situations so that the situation does not repeat itself.

If you have questions about your elderly parent filing bankruptcy call us at 412-414-9366 to set up a free consultation. I would be happy to discuss their situation and see if bankruptcy can help.

Joint Bankruptcy

Married couples have the option of filing a joint bankruptcy, both in Chapter 7 bankruptcy and Chapter 13 bankruptcy. This is a great option to save time and money. When is the best time to take advantage of this option?

The most important question will be who has the debts in the marriage? If only one spouse is liable for all of the debts, in almost every situation they will be the only spouse who needs to file. The most important part of any bankruptcy is the discharge of debt. If you don’t have any debts to discharge, it doesn’t make any sense to file.

Now, what about the more likely scenario where both spouses have some of the debts? If the debts of both spouses are significant, it makes sense to file jointly because the filing fees and court costs are the same whether the bankruptcy is filed individually or alone. Sometimes, one spouse does not want to file even with significant debts. I always point out that filing jointly is a great way to save money on attorney fees and court costs, because if they change their mind at a later date, everything will be filed anew, with all new costs.

It is important to remember that joint debts are only discharged as to the spouse who actually files bankruptcy. The non-filing spouse in these scenarios would become 100% liable for a credit card discharged in bankruptcy by the other spouse. This is called joint and several liability. It allows creditors to collect the entire debt against one or both of the co-debtors, in any proportion. So, if a married couple has numerous joint debts, and only one of the spouses files, it will not protect the other.

It will be important to go over all of your debts with your bankruptcy attorney to determine what is (and what isn’t) dischargeable. Filing a joint bankruptcy is something that married couples with joint debts should strongly consider. One final aside, you have to actually be married to file a joint bankruptcy. Call us at 412-414-9366 to set up a free consultation and discuss your situation.

Employment Status and Bankruptcy

I get a lot of questions about employment status and how it affects a person’s ability to file bankruptcy. There are a lot of scenarios that could come up, but I would like to at least provide a brief overview.

People will ask whether they need to be employed to file a bankruptcy, or conversely, if current employment is a problem with filing. Generally, when speaking about Chapter 7 bankruptcy, being unemployed is not a problem unless you have secured debt which you were trying to keep current. The secured debts that are most important are mortgages and car payments. If you want to keep either of these payments through chapter 7 bankruptcy, you have to be able to show the court that you can afford to do so. This normally requires you to have income and a job. However, if you have a non-following spouse or relative who is making the payments, or you have non-employment income such as Social Security, a pension, or even unemployment, you should be able to keep your secure debts such as a car or home through bankruptcy.

In chapter 13, not having employment can be a problem for the same reasons. In chapter 13 bankruptcy you are required to make a monthly payment to the United States Trustee. Just as above, this is normally more possible if you have regular employment. But if, you have the other types of household income that I mentioned above, Chapter 13 bankruptcy may still be feasible.

The bottom line for filing bankruptcy is that there needs to be money coming in to either support a Chapter 13 bankruptcy payment or to keep secure debts in a Chapter 7 bankruptcy. That money coming in doesn’t necessarily need to be regular employment.

Now, if you have too much employment (that is, you earn too much money) it could be an issue with filing Chapter 7 because it may push you above the means test threshold. I discuss the means test extensively elsewhere in this blog and won’t go over it here. But, if you are working it will be important to know exactly how much you are earning.

Finally, in some scenarios it will be important for your bankruptcy attorney to know if you will be losing your job in the near future. If you are losing your job, you may not be able to support a Chapter 13 bankruptcy that you are planning to file. Also, if you are losing your job, you may be able to get beneath the means test and file Chapter 7 bankruptcy by waiting a bit longer.

Call us at 412-414-9366 if you have any questions about bankruptcy and your employment status. I would be happy to set up a free consultation and discuss your situation!